tag:theconversation.com,2011:/ca/topics/ebay-12506/articleseBay – The Conversation2022-05-02T03:40:34Ztag:theconversation.com,2011:article/1821342022-05-02T03:40:34Z2022-05-02T03:40:34ZACCC says consumers need more choices about what online marketplaces are doing with their data<figure><img src="https://images.theconversation.com/files/460704/original/file-20220502-15-3s0and.jpg?ixlib=rb-1.1.0&rect=0%2C8%2C2731%2C1524&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Consumers using online retail marketplaces such as eBay and Amazon “have little effective choice in the amount of data they share”, according to the <a href="https://www.accc.gov.au/publications/serial-publications/digital-platform-services-inquiry-2020-2025/digital-platform-services-inquiry-march-2022-interim-report">latest report</a> of the Australian Competition & Consumer Commission (ACCC) Digital Platform Services Inquiry. </p>
<p>Consumers may benefit from personalisation and recommendations in these marketplaces based on their data, but many are in the dark about how much personal information these companies collect and share for other purposes. </p>
<p><a href="https://www.accc.gov.au/media-release/concerning-issues-for-consumers-and-sellers-on-online-marketplaces">ACCC chair Gina Cass-Gottlieb</a> said:</p>
<blockquote>
<p>We believe consumers should be given more information about, and control over, how online marketplaces collect and use their data. </p>
</blockquote>
<p>The report reiterates the ACCC’s earlier calls for amendments to the Australian Consumer Law to address unfair data terms and practices. It also points out that the government is considering <a href="https://www.ag.gov.au/integrity/consultations/review-privacy-act-1988">proposals for major changes to privacy law</a>. </p>
<p>However, none of these proposals is likely to come into effect in the near future. In the meantime, we should also consider whether practices such as obtaining information about users from third-party data brokers are fully compliant with existing privacy law. </p>
<h2>Why did the ACCC examine online marketplaces?</h2>
<p>The ACCC examined competition and consumer issues associated with “general online retail marketplaces” as part of its <a href="https://www.accc.gov.au/focus-areas/inquiries-ongoing/digital-platform-services-inquiry-2020-2025">five-year Digital Platform Services Inquiry</a>. </p>
<p>These marketplaces facilitate transactions between third-party sellers and consumers on a common platform. They do not include retailers that don’t operate marketplaces, such as Kmart, or platforms such as Gumtree that carry classified ads but don’t allow transactions.</p>
<p>The ACCC report focuses on the four largest online marketplaces in Australia: Amazon Australia, Catch, eBay Australia and Kogan. In 2020–21, these four carried sales totalling $8.4 billion.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/460716/original/file-20220502-18-4pvx0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/460716/original/file-20220502-18-4pvx0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/460716/original/file-20220502-18-4pvx0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/460716/original/file-20220502-18-4pvx0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/460716/original/file-20220502-18-4pvx0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/460716/original/file-20220502-18-4pvx0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/460716/original/file-20220502-18-4pvx0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Online marketplaces such as Amazon, eBay, Catch and Kogan facilitate transactions between third-party buyers and sellers.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/new-york-usa-november-1-2018-1219079038">Shutterstock</a></span>
</figcaption>
</figure>
<p>According to the report, eBay has the largest sales of these companies. Amazon Australia is the second-largest and the fastest-growing, with an 87% increase in sales over the past two years.</p>
<p>The ACCC examined:</p>
<ul>
<li>the state of competition in the relevant markets</li>
<li>issues facing sellers who depend on selling their products through these marketplaces</li>
<li>consumer issues including concerns about personal information collection, use and sharing.</li>
</ul>
<h2>Consumers don’t want their data used for other purposes</h2>
<p>The ACCC expressed concern that in online marketplaces, “the extent of data collection, use and disclosure … often does not align with consumer preferences”. </p>
<p>The Commission pointed to surveys about <a href="https://www.accc.gov.au/system/files/Consumer%20Policy%20Research%20Centre%20%28CPRC%29%20%2818%20August%202021%29.pdf">Australian consumer attitudes to privacy</a> which indicate:</p>
<ul>
<li>94% did not feel comfortable with how digital platforms including online marketplaces collect their personal information</li>
<li>92% agreed that companies should only collect information they need for providing their product or service</li>
<li>60% considered it very or somewhat unacceptable for their online behaviour to be monitored for targeted ads and offers.</li>
</ul>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-one-simple-rule-change-could-curb-online-retailers-snooping-on-you-166174">How one simple rule change could curb online retailers' snooping on you</a>
</strong>
</em>
</p>
<hr>
<p>However, the four online marketplaces analysed: </p>
<ul>
<li>do not proactively present privacy terms to consumers “throughout the purchasing journey”</li>
<li>may allow advertisers or other third parties to place tracking cookies on users’ devices</li>
<li>do not clearly identify how consumers can opt out of cookies while still using the marketplace.</li>
</ul>
<p>Some of the marketplaces also obtain extra data about individuals from third-party data brokers or advertisers.</p>
<p>The <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3432769">harms from increased tracking and profiling</a> of consumers include decreased privacy; manipulation based on detailed profiling of traits and weaknesses; and discrimination or exclusion from opportunities. </p>
<h2>Limited choices: you can’t just ‘walk out of a store’</h2>
<p>Some might argue that consumers must not actually care that much about privacy if they keep using these companies, but the choice is not so simple. </p>
<p>The ACCC notes the relevant privacy terms are often spread across multiple web pages and offered on a “take it or leave it” basis. </p>
<p>The terms also use “bundled consents”. This means that agreeing to the company using your data to fill your order, for example, may be bundled together with agreeing for the company to use your data for its separate advertising business. </p>
<p>Further, as my research has shown, there is <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3905693">so little competition on privacy</a> between these marketplaces that consumers can’t just find a better offer. The ACCC agrees:</p>
<blockquote>
<p>While consumers in Australia can choose between a number of online marketplaces, the common approaches and practices of the major online marketplaces to data collection and use mean that consumers have little effective choice in the amount of data they share.</p>
</blockquote>
<p>Consumers also seem unable to require these companies to delete their data. The situation is quite different from conventional retail interactions where a consumer can select “unsubscribe” or walk out of a store. </p>
<h2>Does our privacy law currently permit all these practices?</h2>
<p>The ACCC has reiterated its earlier calls to amend the Australian Consumer Law to prohibit unfair practices and make unfair contract terms illegal. (At present unfair contract terms are just void, or unenforceable.)</p>
<p>The report also points out that the government is considering proposals for major changes to privacy law, but <a href="https://theconversation.com/a-new-proposed-privacy-code-promises-tough-rules-and-10-million-penalties-for-tech-giants-170711">these changes</a> are uncertain and may take more than a year to come into effect. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-new-proposed-privacy-code-promises-tough-rules-and-10-million-penalties-for-tech-giants-170711">A new proposed privacy code promises tough rules and $10 million penalties for tech giants</a>
</strong>
</em>
</p>
<hr>
<p>In the meantime, we should look more closely at the practices of these marketplaces under current privacy law. </p>
<p>For example, under the <a href="https://www.legislation.gov.au/Series/C2004A03712">federal Privacy Act</a> the four marketplaces</p>
<blockquote>
<p>must collect personal information about an individual only from the individual unless … it is unreasonable or impracticable to do so.</p>
</blockquote>
<p>However, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3905693">some online marketplaces</a> say they collect information about individual consumers’ interests and demographics from “<a href="https://www.ebay.com.au/help/policies/member-behaviour-policies/user-privacy-notice-privacy-policy?id=4260&mkevt=1&mkcid=1&mkrid=705-53470-19255-0&campid=5338596835&customid=&toolid=10001#section4">data providers</a>” and <a href="https://www.amazon.com.au/gp/help/customer/display.html?nodeId=202075050&ref_=footer_iba">other third parties</a>. </p>
<p>We don’t know the full detail of what’s collected, but demographic information might include our age range, income, or family details. </p>
<p>How is it “unreasonable or impracticable” to obtain information about our demographics and interests directly from us? Consumers could ask online marketplaces this question, and complain to the <a href="https://www.oaic.gov.au/privacy/privacy-complaints">Office of the Australian Information Commissioner</a> if there is no reasonable answer.</p><img src="https://counter.theconversation.com/content/182134/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Katharine Kemp receives funding from The Allens Hub for Technology, Law and Innovation. She is a Member of the Advisory Board of the Future of Finance Initiative in India, and the Australian Privacy Foundation.</span></em></p>Consumers should have more control over how online marketplaces such as eBay and Amazon collect and use their data, according to a new ACCC report.Katharine Kemp, Senior Lecturer, Faculty of Law & Justice, UNSW, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1762032022-02-07T14:35:56Z2022-02-07T14:35:56ZCookies: I looked at 50 well-known websites and most are gathering our data illegally<figure><img src="https://images.theconversation.com/files/444547/original/file-20220204-25-3us4d4.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">It takes the biscuit. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/cube-dice-block-cookie-icon-on-1954978213">stockwerk-fotodesign</a></span></figcaption></figure><p>The owners of Google and Facebook were <a href="https://www.cnil.fr/en/cookies-cnil-fines-google-total-150-million-euros-and-facebook-60-million-euros-non-compliance">both heavily fined</a> for using cookies illegally at the tail end of 2021 by the French data protection authority, <a href="https://www.cnil.fr/en/cookies-cnil-fines-google-total-150-million-euros-and-facebook-60-million-euros-non-compliance">Commission Nationale de l’Informatique et des Liberté</a> (CNIL). On the French versions of Google, its sister platform YouTube, and Facebook, users were being asked to consent to cookies in such a way that it was much easier for them to accept than reject the request. They could accept cookies with just one click but there was a more laborious process for refusing. </p>
<hr>
<iframe id="noa-web-audio-player" style="border: none" src="https://embed-player.newsoveraudio.com/v4?key=x84olp&id=https://theconversation.com/cookies-i-looked-at-50-well-known-websites-and-most-are-gathering-our-data-illegally-176203&bgColor=F5F5F5&color=D8352A&playColor=D8352A" width="100%" height="110px"></iframe>
<p><em>You can listen to more articles from The Conversation, narrated by Noa, <a href="https://theconversation.com/uk/topics/audio-narrated-99682">here</a>.</em></p>
<hr>
<p>Google owner Alphabet was fined €150 million (£125 million) and Facebook owner Meta €60 million. Alphabet was fined more because its breaches affected more people and it had been in trouble for violations <a href="https://www.cnil.fr/en/cookies-council-state-confirms-sanction-imposed-cnil-2020-google">in the past</a>. Both companies were also given three months to change their systems to make it as easy for users to reject cookie requests. </p>
<p>Meta and Alphabet have yet to comply, though they have until April to do so. The law in the UK and the rest of the EU is also the same as in France, so it is going to be interesting to see what they do in these jurisdictions too. </p>
<p>In the meantime, I looked at what many other companies were doing and found that many are still collecting data using cookies in similar ways. So what’s going on? </p>
<h2>Cookie laws and workarounds</h2>
<p>Cookies are small text files stored by websites on our internet browsers, which allow the website to gather information about us. Some cookies <a href="https://www.cookiepro.com/knowledge/what-are-strictly-necessary-cookies/#:%7E:text=Examples%20of%20strictly%20necessary%20cookies,a%20website%20through%20logging%20in.">are necessary</a> for us to be able to browse the site in question – for example, to add items to a shopping cart. </p>
<p>More <a href="https://www.dataguard.co.uk/blog/data-protection-third-party-cookies-vs.-first-party-cookies">contentious cookies</a> track a user’s <a href="https://gdpr.eu/cookies/">browsing behaviour</a>. There are first-person cookies, where the site in question tracks users’ behaviour to offer them relevant products; and third-party cookies, where this is done by another company to allow others to advertise to the user instead – the classic example is Google Ads. </p>
<p>Cookies gather so much information that it is usually more than enough to identify the person behind the device. Besides visits to particular web pages, they <a href="https://privacy.net/stop-cookies-tracking/">can also record</a> a person’s search queries, goods or services purchased, IP address and exact location. </p>
<p>From this, it is possible to infer a person’s name, nationality, language, religion, sexual orientation and other intimate details – most of which are <a href="https://gdpr-info.eu/art-9-gdpr/">special categories</a> of personal data that cannot be processed without the explicit consent of the individual under EU <a href="https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32002L0058&from=EN">ePrivacy Directive</a> and the EU and UK’s General Data Protection Regulation (GDPR). </p>
<p>The GDPR requires <a href="https://gdpr-info.eu/recitals/no-32/">such consent</a> to be specific, informed, unambiguous and <a href="https://gdpr-info.eu/art-7-gdpr/">given freely</a> – requiring affirmative action by the user. Unfortunately, this is not giving us a great deal of protection.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/444548/original/file-20220204-13-btb6yl.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Artist's representation of the GDPR attached to various padlock symbols" src="https://images.theconversation.com/files/444548/original/file-20220204-13-btb6yl.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/444548/original/file-20220204-13-btb6yl.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=300&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444548/original/file-20220204-13-btb6yl.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=300&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444548/original/file-20220204-13-btb6yl.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=300&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444548/original/file-20220204-13-btb6yl.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=377&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444548/original/file-20220204-13-btb6yl.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=377&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444548/original/file-20220204-13-btb6yl.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=377&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Worth the paper it’s written on?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/3d-illustration-abstract-network-protected-against-1064933888">Olivier le Moal</a></span>
</figcaption>
</figure>
<p>Websites have used various methods to get around the requirements. Most cookie consent requests used to be presented with pre-selected tick boxes that, by default, made individuals accept cookies on their devices. In 2019 the <a href="https://curia.europa.eu/juris/document/document.jsf;jsessionid=85B99257798E49292E725F5425756780?text=&docid=218462&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=9152887">Court of Justice of the European Union (CJEU)</a> decided websites could no longer do this, since it avoided the GDPR’s affirmative action requirement. But such is the value of the data that can be gathered using cookies that websites merely switched to different workarounds instead. </p>
<p>The popular option is the one that saw Facebook and Google sanctioned by the CNIL in France. The CNIL essentially said that when it comes to refusing cookie consent, two clicks are too many: it meant that people are being pressured into consenting, and was therefore contrary to the GDPR’s free consent requirement. This presumably explains why, from a <a href="https://arxiv.org/abs/2001.02479">2020 experimental study</a> of users who had lived in the EU, 93% accepted cookies regardless of having a second window option for managing them. </p>
<h2>The wider issue</h2>
<p>The French interpretation of the GDPR is not binding on the British courts, the CJEU or other regulators in Europe. So, once the CNIL’s three-month deadline runs out, websites with similar imbalanced cookie consent in other GDPR countries might claim there is an ambiguity in the law around what counts as consent. But really the law is quite clear and the French interpretation should be a strong signal that other privacy authorities will reach a similar conclusion. </p>
<p>And yet, when I looked at 50 randomly chosen well-known websites, only 15 (30%) appear to comply with the EU/UK data privacy laws. Some of those sites which are compliant, such as <a href="https://www.ebay.co.uk/">ebay.co.uk</a>, provide “Accept” and “Decline” buttons in the same banner. Others such as <a href="https://www.bbc.co.uk/">bbc.co.uk</a> make it more difficult to reject cookies but allow users to browse without consenting to them. </p>
<p>As many as 32 (64%) of the sites did not appear to comply with EU and UK cookies laws. These include Google, Facebook and Twitter, as well as other major businesses such as <a href="https://www.ryanair.com/gb/en">Ryanair</a> and the website of <a href="https://www.mirror.co.uk/">the Daily Mirror</a>. </p>
<p>Twitter, for example, merely notifies the user of consent in a banner that states: “By using Twitter’s services, you agree to our cookies use”. Other companies, including Google and Facebook, hide the refuse/decline button in a second window. Still others, such as Ryanair, create a cookies wall where visitors may use the site only if they choose “Yes, I agree” or go to the “View cookies setting” to select their preferences. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/444549/original/file-20220204-25-4v62gt.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Screenshot of Ryanair cookie request window" src="https://images.theconversation.com/files/444549/original/file-20220204-25-4v62gt.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/444549/original/file-20220204-25-4v62gt.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=284&fit=crop&dpr=1 600w, https://images.theconversation.com/files/444549/original/file-20220204-25-4v62gt.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=284&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/444549/original/file-20220204-25-4v62gt.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=284&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/444549/original/file-20220204-25-4v62gt.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=357&fit=crop&dpr=1 754w, https://images.theconversation.com/files/444549/original/file-20220204-25-4v62gt.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=357&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/444549/original/file-20220204-25-4v62gt.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=357&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Ryanair</span></span>
</figcaption>
</figure>
<p>There were a further three websites where it was either unclear or borderline as to whether they were within the rules. <a href="https://open.spotify.com/">Spotify</a>, like the BBC, has a typical cookies banner but lets users browse without accepting the cookies. But its cookies banner covers half of the device screen. This reduces the quality of the user’s browsing experience and could potentially be regarded as a coercive practice.</p>
<p>The fact that big tech companies are not complying with cookies laws suggests that millions of citizens are likely having their personal data gathered unlawfully. It is hard not to wonder if some companies are knowingly breaching the rules because they generate so much revenue from their cookies that it’s worth risking a sanction for a privacy breach. </p>
<p>They may also be betting that the relevant authorities are too underfunded or understaffed to enforce the rules. For example, a <a href="https://www.nationaleombudsman.nl/system/files/bijlage/Nationale%20ombudsman%20-%20Rapport%20Autoriteit%20Persoonsgegevens%20Voor%20een%20dichte%20deur_0.pdf">recent report</a> by the Dutch ombudsman highlighted that the relevant authority in that country had 9,800 unresolved privacy complaints at the end of 2020. And <a href="https://www.iccl.ie/wp-content/uploads/2021/09/Europes-enforcement-paralysis-2021-ICCL-report-on-GDPR-enforcement.pdf">according to</a> the Irish Council for Civil Liberties, “almost all (98%) major GDPR cases referred to Ireland remain unresolved” – in part due to lack of budget and sufficient specialist staff. The situation is unlikely to be radically different in other EU countries. </p>
<p>If the UK and EU are serious about protecting citizens’ privacy, they need to amend the rules to be more specific about what a consent window should look like, and run information campaigns to make it clear to citizens that withholding consent cannot in any way limit their browsing experience. They should also allocate the required resources to enforce the rules. Only then will the laws around these little-understood tools for harvesting our data be fit for purpose. </p>
<hr>
<p><em>We asked Meta, Alphabet, Ryanair, Twitter and Daily Mirror publisher Reach if they would like to comment. Reach declined and Alphabet, Twitter and Ryanair did not respond. Meta said:</em> </p>
<blockquote>
<p>We are reviewing the [CNIL’s] decision, and remain committed to working with relevant authorities. Our cookie consent controls provide people with greater control over their data, including a new settings menu on Facebook and Instagram where people can revisit and manage their decisions at any time, and we continue to develop and improve these controls.</p>
</blockquote><img src="https://counter.theconversation.com/content/176203/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Asress Adimi Gikay does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The laws about cookies are fairly clear in EU and UK, but many big companies are breaking them anyway.Asress Adimi Gikay, Lecturer in AI, Disruptive Innovation and Law| Brunel Law School| Centre for AI: Social and Digital Innovation, Brunel University LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1661742021-08-16T19:53:06Z2021-08-16T19:53:06ZHow one simple rule change could curb online retailers’ snooping on you<figure><img src="https://images.theconversation.com/files/416255/original/file-20210816-21-6808b0.jpg?ixlib=rb-1.1.0&rect=46%2C0%2C5184%2C3453&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Rupixen.com/Unsplash</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>I spent last week studying the 26,000 words of privacy terms published by eBay and Amazon, trying to extract some straight answers, and comparing them to the privacy terms of other online marketplaces such as Kogan and Catch (my full summary is <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3905693">here</a>).</p>
<p>There’s bad news and good news.</p>
<p>The bad news is that none of the privacy terms analysed are good. Based on their published policies, there is no major online marketplace operating in Australia that sets a commendable standard for respecting consumers’ data privacy.</p>
<p>All the policies contain vague, confusing terms and give consumers no real choice about how their data are collected, used and disclosed when they shop on these websites. Online retailers that operate in both Australia and the European Union give their customers in the EU better privacy terms and defaults than us, because the EU has stronger privacy laws.</p>
<p>The Australian Competition and Consumer Commission (ACCC) is currently collecting submissions as part of an inquiry into online marketplaces in Australia. You can have your say <a href="https://consultation.accc.gov.au/mergers-and-adjudication/consumer-questionnaire-general-online-retail/">here</a> by August 19.</p>
<p>The good news is that, as a first step, there is a clear and simple “anti-snooping” rule we could introduce to cut out one unfair and unnecessary, but very common, data practice.</p>
<p>Deep in the fine print of the privacy terms of all the above-named websites, you’ll find an unsettling term.</p>
<p>It says these retailers can obtain extra data about you from other companies, for example, <a href="https://theconversation.com/its-time-for-third-party-data-brokers-to-emerge-from-the-shadows-94298">data brokers</a>, advertising companies, or suppliers from whom you have previously purchased.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/its-time-for-third-party-data-brokers-to-emerge-from-the-shadows-94298">It's time for third-party data brokers to emerge from the shadows</a>
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</em>
</p>
<hr>
<p>eBay, for example, can take the data about you from a data broker and combine it with the data eBay already has about you, to form a detailed profile of your interests, purchases, behaviour and characteristics.</p>
<p>The problem is the online marketplaces give you no choice in this. There’s no privacy setting that lets you opt out of this data collection, and you can’t escape by switching to another major marketplace, because they all do it.</p>
<p>An online bookseller doesn’t need to collect data about your fast-food preferences to sell you a book. It wants these extra data for its own advertising and business purposes.</p>
<figure class="align-center ">
<img alt="Empty Amazon packaging" src="https://images.theconversation.com/files/416259/original/file-20210816-13-1vkjfla.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/416259/original/file-20210816-13-1vkjfla.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=664&fit=crop&dpr=1 600w, https://images.theconversation.com/files/416259/original/file-20210816-13-1vkjfla.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=664&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/416259/original/file-20210816-13-1vkjfla.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=664&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/416259/original/file-20210816-13-1vkjfla.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=834&fit=crop&dpr=1 754w, https://images.theconversation.com/files/416259/original/file-20210816-13-1vkjfla.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=834&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/416259/original/file-20210816-13-1vkjfla.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=834&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Online shopping leaves a digital paper trail as well as empty boxes.</span>
<span class="attribution"><span class="source">STRF/STAR MAX/IPx/AP</span></span>
</figcaption>
</figure>
<p>You might well be comfortable giving retailers information about yourself, so as to receive targeted ads and aid the retailer’s other business purposes. But this preference should not be assumed. If you want retailers to collect data about you from third parties, it should be done only on your explicit instructions, rather than automatically for everyone.</p>
<p>The “bundling” of these uses of a consumer’s data is <a href="https://www.oaic.gov.au/updates/news-and-media/flight-centre-found-to-have-interfered-with-privacy/">potentially unlawful</a> even under our existing privacy laws, but this needs to be made clear. </p>
<h2>Time for an ‘anti-snooping’ rule</h2>
<p>Here’s my suggestion, which forms the basis of my own submission to the ACCC inquiry. </p>
<p>Online retailers should be barred from collecting data about a consumer from another company, unless the consumer has clearly and actively requested this.</p>
<p>For example, this could involve clicking on a check-box next to a plainly worded instruction such as:</p>
<blockquote>
<p>Please obtain information about my interests, needs, behaviours and/or characteristics from the following data brokers, advertising companies and/or other suppliers.</p>
</blockquote>
<p>The third parties should be specifically named. And the default setting should be that third-party data are not collected without the customer’s express request.</p>
<p>This rule would be consistent with what we know from <a href="https://cprc.org.au/app/uploads/2018/07/Consumer-Data-and-the-Digital-Economy_smallest-file-size.pdf">consumer surveys</a>: most Australian consumers are not comfortable with companies unnecessarily sharing their personal information.</p>
<p>There could be reasonable exceptions to this rule, such as for fraud detection, address verification or credit checks. But data obtained for these purposes should not be used for marketing, advertising or generalised “market research”.</p>
<h2>Can’t we already opt out of targeted ads?</h2>
<p>Online marketplaces do claim to allow choices about “personalised advertising” or marketing communications. Unfortunately, these are worth little in terms of privacy protection.</p>
<p>Amazon says you can opt out of seeing targeted advertising. It does not say you can opt out of all data collection for advertising and marketing purposes.</p>
<p>Similarly, eBay lets you opt out of being shown targeted ads. But the later passages of its <a href="https://www.ebay.com.au/help/policies/p-behaviour-policies/ebay-cookie-notice?id=4267&mkevt=1&mkcid=1&mkrid=705-53470-19255-0&campid=5338596835&customid=&toolid=10001">Cookie Notice</a> state:</p>
<blockquote>
<p>your data may still be collected as described in our User Privacy Notice.</p>
</blockquote>
<p>This gives eBay the right to continue to collect data about you from data brokers, and to share them with a range of third parties.</p>
<p>Many retailers and large digital platforms operating in Australia justify their collection of consumer data from third parties on the basis you’ve already given your implied consent to the third parties disclosing it.</p>
<p>That is, there’s some obscure term buried in the thousands of words of privacy policies that supposedly apply to you, which says that <a href="https://www.bunnings.com.au/policies/privacy-policy">Bunnings</a>, for instance, can share data about you with various “related companies”.</p>
<p>Of course, Bunnings didn’t highlight this term, let alone give you a choice in the matter, when you ordered your hedge cutter last year. It only included a “Policies” link at the foot of its website; the term was on another web page, buried in the detail of its Privacy Policy.</p>
<p>Such terms should ideally be eradicated entirely. But in the meantime, we can turn the tap off on this unfair flow of data, by stipulating that online retailers cannot obtain such data about you from a third party without your express, active and unequivocal request.</p>
<h2>Who should be bound by an ‘anti-snooping’ rule?</h2>
<p>While the focus of this article is on online marketplaces covered by the ACCC inquiry, many other companies have similar third-party data collection terms, including <a href="https://www.woolworths.com.au/shop/discover/about-us/privacy-policy">Woolworths</a>, <a href="https://www.coles.com.au/privacy#coles-group">Coles</a>, major banks, and digital platforms such as Google and Facebook.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/heres-how-tech-giants-profit-from-invading-our-privacy-and-how-we-can-start-taking-it-back-120078">Here's how tech giants profit from invading our privacy, and how we can start taking it back</a>
</strong>
</em>
</p>
<hr>
<p>While some argue users of “free” services like Google and Facebook should expect some surveillance as part of the deal, this should not extend to asking other companies about you without your active consent.</p>
<p>The anti-snooping rule should clearly apply to any website selling a product or service.</p>
<p>With lockdowns barring many of us from visiting physical shops, we should be able to make purchases online without being unwittingly roped into a company’s advertising side hustle.</p><img src="https://counter.theconversation.com/content/166174/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Katharine Kemp receives funding from The Allens Hub for Technology, Law and Innovation. She is a Member of the Advisory Board of the Future of Finance Initiative in India, the Centre for Law, Markets & Regulation and the Australian Privacy Foundation.</span></em></p>There is no major online marketplace operating in Australia that sets a commendable standard for respecting consumers’ data privacy. Letting customers opt out of data tracking would be a good start.Katharine Kemp, Senior Lecturer, Faculty of Law & Justice, UNSW, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1520422020-12-14T19:00:44Z2020-12-14T19:00:44ZHow independent are business spin-offs, really?<figure><img src="https://images.theconversation.com/files/374804/original/file-20201214-19-f0nyb1.jpg?ixlib=rb-1.1.0&rect=0%2C15%2C1280%2C833&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">An Otis escalator in Norrköping, Sweden. The company was spun off by its former parent, United Technologies, in 2020. </span> </figcaption></figure><p>We are all familiar with spin-offs in the entertainment industry – radio and television programs, video games, films, or any narrative works derived from already existing works that focus on more details and different aspects from the original work (e.g., particular topics, characters or events). Well, a corporate spin-off is the creation of an independent company through the sale or distribution of new shares of an existing business or division of a parent company. The spun-off companies are expected to be <a href="https://www.wsj.com/articles/the-reason-investors-love-spinoffs-juicier-returns-1507681008">worth more as independent entities than as parts of a larger business</a>. But are they really independent?</p>
<p>Spin-off transactions have become increasing popular and each year in the United States, there are typically dozens of them like United Technologies’ spinoff of the <a href="https://www.courant.com/business/hc-biz-utc-otis-carrier-spinoffs-20200313-pb6n6opnrrcpnagv2thmamobnm-story.html">Otis Elevator Company</a>, eBay’s spinoff of <a href="https://www.geekwire.com/2015/everything-you-need-to-know-about-ebay-and-paypals-split-and-how-it-impacts-amazon/">PayPal</a>, or Expedia’s spinoff of <a href="https://www.bbc.com/news/business-13007946">TripAdvisor</a>. In September, <a href="https://www.reuters.com/article/us-siemens-power/siemens-to-give-shareholders-55-of-energy-business-spin-off-idUSKBN2321VX">Siemens Energy</a> became the largest German spin-off to go public ever. </p>
<h2>Pressure to perform</h2>
<p>Such newly spun-off firms are supposed to be independent and publicly traded, and thus, they might be under pressure to conform to certain expectations from audiences in the capital market who observe and judge the behaviours of spun-off firms. </p>
<p>A particularly critical audience are security analysts, who are incentivized to make accurate predictions and therefore prefer predictability in the performance of the companies they cover, and thus have a strong preference for firms that exhibit only moderate levels of risk-taking (e.g. investments in R&D).</p>
<figure class="align-center ">
<img alt="eBay office" src="https://images.theconversation.com/files/374806/original/file-20201214-20-1evrnfu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/374806/original/file-20201214-20-1evrnfu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=417&fit=crop&dpr=1 600w, https://images.theconversation.com/files/374806/original/file-20201214-20-1evrnfu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=417&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/374806/original/file-20201214-20-1evrnfu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=417&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/374806/original/file-20201214-20-1evrnfu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=524&fit=crop&dpr=1 754w, https://images.theconversation.com/files/374806/original/file-20201214-20-1evrnfu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=524&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/374806/original/file-20201214-20-1evrnfu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=524&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A building in eBay’s office campus in San Jose in 2006. PayPal, which was part of eBay at the time, also had offices here.</span>
<span class="attribution"><span class="source">Coolcaesar/Wikipdia</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>In an <a href="https://doi.org/10.1016/j.lrp.2020.101966">article published in <em>Long Range Planning</em></a>, we provide some insights on how a spin-off’s status and its attachment to its former parent influence its risk-taking. Using a dataset of 102 spin-off transactions occurring between 1995 and 2010, we find that high- and low-status spun-off firms exhibit higher risk-taking compared to middle-status spun-off firms, which are actually impressed by what the analysts want. </p>
<p>Consider, for instance, the case of the cigarette and tobacco manufacturer Philip Morris International. Spun out of Altria in 2008, it has comparably low status, as is indicated by a low number of analysts that regularly cover the firm, and consequently exhibits fairly high risk-taking. Similarly, Agilent Technologies, which was spun out of Hewlett Packard in 2000, shows high risk-taking, although it considered a relatively high-status firm in the capital markets. Only middle-status spin-offs like Dr Pepper Snapple (spun out of Cadbury in 2008) give in to analysts’ wishes and reduce their risk-taking. </p>
<p>Moreover, leveraging a novel comprehensive measure of attachment, we further find that this effect is weaker when the spin-off is still more “attached” to its former parent firm. Such attachment could exist in the form of hard links such as retained ownership or soft links like a shared name, and makes spin-offs focus more on what the former parent wants rather than what other parties, analysts in particular, want.</p>
<p>The spun-off firms’ ostensible independence is frequently an illusion. On the one hand, they often respond to – and are thus at least partially dependent on – status evaluations made by capital market audiences. On the other hand, spun-off are often still attached to – and thus partially dependent on – their parent firms. Ultimately, only spun-off firms with high or low status and simultaneously low attachment to their parent firms are truly independent in their decision-making.</p>
<h2>Practical implications</h2>
<p>Our findings highlight that spun-off firms should be aware of their own leanings regarding who to follow. The executives of firms with mid-level status appear to pay close attention to analysts’ expectations and adapt their firms’ behaviours accordingly. However, prior research shows that this may not always be in a firm’s best long-term interest. Consequently, managers may wish to make conscious choices regarding risk-taking, even when those go against analysts’ expectations and carry the risk of status loss. Specifically, managers must deliberately make the trade-off between the benefits of risk-taking (e.g., in the form of potentially greater returns) and status (e.g., in the form of lower cost of capital). Boards may wish to structure compensation schemes and other incentives <a href="https://doi.org/10.5465/annals.2015.0121">accordingly</a>.</p>
<p>Similarly, in the case of high attachment managers might be inclined to adhere excessively to logics and processes from a spun-off firm’s parent firm. Although some aspects of attachment (e.g., the duration for which the spun-off was previously affiliated with the parent or how strongly the businesses of spin-off and former parent are related) are largely fixed, the managers of spun-off firms and their parents can actively affect other dimensions of attachment. For example, firms can jointly increase or decrease attachment through the appointment or dismissal of common directors at any point after the transaction. </p>
<p>Spun-off firms should therefore actively assess whether they will benefit from a close relationship with their former parent, i.e., substantial attachment. In particular, entrepreneurial spun-off firms with very high or very low status might wish to refrain from remaining closely attached to avoid stifling innovation through restrictions on risky investments.</p><img src="https://counter.theconversation.com/content/152042/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lorenz Graf-Vlachy ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>New research published in Long Range Planning provides insights on how a spin-off’s status and attachment to its former parent influence its risk-taking.Lorenz Graf-Vlachy, Professor, ESCP Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1159862019-04-26T10:50:41Z2019-04-26T10:50:41ZDon’t buy that Gucci knockoff: Your bargain benefits organized crime while endangering countless others<figure><img src="https://images.theconversation.com/files/271095/original/file-20190425-121241-1t84ate.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Those cheap fakes might be tempting, but the hidden costs are high.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/bangkok-thailand-march-15-fake-handbags-276027005?src=96-F1hrH68eormXOUBqBAg-1-2">Settawat Udom/Shutterstock.com</a></span></figcaption></figure><p>If you’ve ever been to <a href="https://www.nycgo.com/boroughs-neighborhoods/manhattan/chinatown">New York’s Chinatown</a>, <a href="https://www.thesanteealley.com/">Los Angeles’ Santee Alley</a> or <a href="https://fathomaway.com/best-street-markets-in-hong-kong/">Hong Kong’s Gage Street</a>, you know what draws the crowds: the chance to snag knockoff Jimmy Chu shoes, a Rolex watch or a pair of Ray-Ban sunglasses for a <a href="https://www.researchgate.net/profile/Martin_Eisend/publication/252248476_Explaining_Counterfeit_Purchases_A_Review_and_Preview/links/0a85e5395b8b8297a9000000/Explaining-Counterfeit-Purchases-A-Review-and-Preview.pdf">fraction of the retail price</a>. </p>
<p>While consumers may think it’s a “<a href="https://globalnews.ca/news/4163571/counterfeit-goods-economy/">victimless crime</a>” that only hurts big corporations, counterfeiting harms countless individuals as well, from sweatshop workers who toil without legal protections to consumers themselves, <a href="https://www.reuters.com/article/us-pharmaceuticals-fakes/tens-of-thousands-dying-from-30-billion-fake-drugs-trade-who-says-idUSKBN1DS1XJ">many thousands of whom die annually</a> due to fraudulent drugs and foods. It’s also the biggest source of profit for criminal gangs. </p>
<p>President Donald Trump <a href="https://www.apnews.com/71d9d74bb31a4447b7a34446cf2410be">highlighted the problem</a> in early April when he ordered U.S. federal agencies to do more to stem the flow of counterfeit goods online. But what has been lost in debates about how to curb counterfeiting is the <a href="https://doi.org/10.1108/07363761111115980">role consumers play</a>. </p>
<p><a href="https://scholar.google.com/citations?user=mZOfzEkAAAAJ&hl=en">I’ve spent the past five years studying</a> the serious problem of product counterfeiting as part of my ongoing research on crimes committed against businesses. Just as <a href="https://www.journals.uchicago.edu/doi/pdfplus/10.1086/449181">U.S. demand fuels illegal drug trafficking</a>, it has become exceedingly clear to me that consumers play an integral part in the persistence and growth of product counterfeiting. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/271091/original/file-20190425-121228-vwbsn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/271091/original/file-20190425-121228-vwbsn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/271091/original/file-20190425-121228-vwbsn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/271091/original/file-20190425-121228-vwbsn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/271091/original/file-20190425-121228-vwbsn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/271091/original/file-20190425-121228-vwbsn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/271091/original/file-20190425-121228-vwbsn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">New York police sized over $1 million in counterfeit Gucci, Prada, Fendi, Rolex and Coach goods in a Chinatown raid in 2008.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Counterfeit-Bust/76c222a460184c5385238a39d629b649/16/0">AP Photo/Bebeto Matthews</a></span>
</figcaption>
</figure>
<h2>‘Wild West’ of retail</h2>
<p>The growth of e-commerce, which the Trump administration compares with the lawless “Wild West,” <a href="https://www.adweek.com/brand-marketing/counterfeit-goods-are-a-460-billion-industry-and-most-are-bought-and-sold-online/">is making it easier for counterfeiters</a> to reach U.S. consumers.</p>
<p>In the U.S., the number of <a href="https://www.cbp.gov/document/stats/fy-2017-ipr-seizure-statistics">counterfeit products seized</a> at ports of entry has more than doubled over the past decade. </p>
<p>Globally, counterfeiters sold an estimated <a href="https://www.apnews.com/ef15478fa38649b5ba29b434c8e87c94">US$1 trillion of fake goods</a> in 2017, a figure that is expected to soar past $1.8 trillion by 2020. As a result, businesses suffered an estimated $323 billion in losses in 2017. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/271094/original/file-20190425-121262-1euqoyf.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/271094/original/file-20190425-121262-1euqoyf.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/271094/original/file-20190425-121262-1euqoyf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=434&fit=crop&dpr=1 600w, https://images.theconversation.com/files/271094/original/file-20190425-121262-1euqoyf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=434&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/271094/original/file-20190425-121262-1euqoyf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=434&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/271094/original/file-20190425-121262-1euqoyf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=546&fit=crop&dpr=1 754w, https://images.theconversation.com/files/271094/original/file-20190425-121262-1euqoyf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=546&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/271094/original/file-20190425-121262-1euqoyf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=546&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">E-commerce sites are rife with cheap knockoffs like this one.</span>
<span class="attribution"><a class="source" href="https://www.ebay.co.uk/itm/Brand-new-Gucci-laveugle-par-amour-pouch-clutch-bag-wash-bag-toiletry-bag/133033171076?_trkparms=aid%3D111001%26algo%3DREC.SEED%26ao%3D1%26asc%3D20180816085401%26meid%3Dddad6341c9f944d6a38a1eaa7f48808c%26pid%3D100970%26rk%3D2%26rkt%3D4%26sd%3D113727232248%26itm%3D133033171076&_trksid=p2481888.c100970.m5481&_trkparms=pageci%3Ace6455ee-6799-11e9-8eef-74dbd1802eb6%7Cparentrq%3A5636c13b16a0ad4b56ac0358fff22937%7Ciid%3A1">eBay</a></span>
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<p>Profits earned from the sale of counterfeit goods <a href="http://archive.fortune.com/magazines/fortune/fortune_archive/2006/05/01/8375455/index.htm">benefit legitimate companies</a> who manufacture, sell or distribute counterfeits, as well as illegal businesses and criminal organizations.</p>
<p>Trump’s directive focused on getting online marketplaces like eBay, Amazon and Alibaba to do more to remove knockoffs from their virtual shelves or trying to stem the flow of goods over the border. While this makes some sense <a href="https://www.gao.gov/assets/690/689713.pdf?mod=article_inline">given estimates</a> that a large share of goods being sold on these sites are counterfeit, what it does not do is address the source of the problem: consumer demand. </p>
<h2>Counterfeit accomplices</h2>
<p>A common saying among brand owners, the companies that own legitimate trademarks, is that the only sure way for a company to avoid a counterfeiting problem is to produce a product that no one wants to buy. </p>
<p>If <a href="https://strathprints.strath.ac.uk/4461/">no one wanted</a> Coach, Chanel or Michael Kors handbags, for example, there would be no point in knockoffs. </p>
<p>The lesson to take away from this is that consumer demand for legitimate goods creates incentives for counterfeiters to create and sell fakes. And while the majority of shoppers have <a href="http://a-capp.msu.edu/product-counterfeiting-in-michigan-and-the-expectations-and-priorities-for-state-and-local-law-enforcement-assessing-the-awareness-of-and-response-to-the-problem/">no desire to purchase counterfeit products</a> – and in fact are themselves victims of this deception – there are many <a href="https://doi.org/10.1016/0148-2963(95)00009-7">who willingly buy counterfeit goods</a> in order to get what they perceive is a bargain. </p>
<p><a href="http://dx.doi.org/10.1002/(SICI)1520-6793(199808)15:5%3C405::AID-MAR1%3E3.0.CO;2-B">Researchers have found</a> that there are two general price-focused reasons consumers choose to purchase counterfeit goods. They may feel that the cost of the desired legitimate good is too high, thus they settle for a knockoff that costs a fraction of the price. Or, even if they could afford the legitimate good, they choose the fake because it seems to be a savvy shopping decision. </p>
<p>Regardless of the reason, their decision <a href="https://www.emeraldinsight.com/doi/abs/10.1108/07363769310047374?casa_token=ubbt3hy2uowAAAAA:b69Q7hIe1XIRgJQ6FvAqLx_FoFbUdDQ6N_X3VB7F0MB3Mt3CIn-rwUcT7ZJFGWo1wyGCHR1I_mMFrgc">makes them accomplices</a> to this illegal activity, providing counterfeiters with more financial resources. And more importantly, it can place them at risk for serious harm. </p>
<p>While it may seem normal and not harmful to rationalize the purchase of a counterfeit purse as a way to save money, <a href="https://doi.org/10.1177/0002764217734264">my own research</a> has found that the same logic can lead people to <a href="https://www.independent.co.uk/news/long_reads/smuggling-cigarettes-tobacco-counterfeit-illicit-trade-black-market-crime-a8479021.html">buy tobacco laced with arsenic</a> and tainted medications that have led to <a href="https://www.nature.com/articles/434132a">serious illness</a> or <a href="https://link.springer.com/article/10.2165/00002018-200326140-00001">even death</a>.</p>
<h2>Who gets hurt</h2>
<p>While it may be difficult for consumers to care about the losses suffered by a multinational company like Gucci, Chanel or Rolex, they should be able to sympathize with the plight of other victims of counterfeiting.</p>
<p>For example, the people producing counterfeit goods include <a href="https://www.cnbc.com/id/38229835">children forced to work in sweatshop</a> conditions for hours on end and <a href="https://heinonline.org/HOL/Page?handle=hein.journals/cardplp15&div=16&g_sent=1&casa_token=&collection=journals&t=1556223833">underpaid people forced to work in dangerous conditions</a> under threat of punishment from factory owners.</p>
<p>Some <a href="https://share.america.gov/whats-wrong-with-buying-counterfeit-goods/">counterfeiting schemes</a> have even been tied to human smuggling rings, international organized crime groups and drug gangs. The United Nations lists counterfeiting as one of the <a href="http://www.unicri.it/topics/counterfeiting/organized_crime/">most lucrative criminal activities</a> for transnational organized gangs. In fact, <a href="https://www.occrp.org/en/27-ccwatch/cc-watch-briefs/6240-ngo-transnational-organized-crime-groups-make-us-2-2-trillion-a-year">counterfeiting is more profitable</a> for these groups than drug smuggling or human trafficking.</p>
<p>Put another way, counterfeiting is not an issue of who is losing money. It’s about who is getting the money: criminals. And the victims include pretty much everyone else, from the workers to unsuspecting consumers themselves.</p><img src="https://counter.theconversation.com/content/115986/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jay Kennedy has received funding from CropLife International and MarkMonitor. The Center for Anti-Counterfeiting and Product Protection receives support from a variety of corporations, which can be found on the Center's website: a-capp.msu.edu</span></em></p>The Trump administration recently announced a plan to curb counterfeiting on websites and at ports of entry. But what’s missing is the role consumers play in supporting this criminal activity.Jay Kennedy, Assistant Professor of Criminal Justice, Michigan State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1110502019-03-25T21:21:40Z2019-03-25T21:21:40ZSellers’ reputations in e-retail markets: do they matter?<figure><img src="https://images.theconversation.com/files/264910/original/file-20190320-93057-1jipwdm.jpg?ixlib=rb-1.1.0&rect=0%2C1%2C1000%2C661&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Do online sellers' reputations matter? According to a March 2019 study, not particularly. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/287361545?size=medium_jpg">Shutterstock</a></span></figcaption></figure><p>The volume of online sales has skyrocketed over the last 10 years, taking up larger and larger shares of total retail sales. E-retail sales account now for <a href="https://www.statista.com/statistics/534123/e-commerce-share-of-retail-sales-worldwide/">10.2% of all retail sales worldwide</a> and they are expected to reach <a href="https://www.statista.com/statistics/379087/e-commerce-share-of-retail-sales-in-china/">33% of total sales in China this year</a>.</p>
<p>Sales on electronic platforms have the peculiarity that prospective buyers cannot directly check the features and intrinsic quality of items. Instead, they have to rely on the information disclosed by sellers who have therefore an informational advantage. Sellers could in principle trick buyers by passing off low-quality items as being high quality. Buyers might anticipate this by simply refusing to buy, or by offering a lower price for the same transactions. This action/reaction by sellers and buyers could lead to a situation in which e-retail markets do not work at their full potential, and only a limited number of transactions occur. Thus, establishing a relationship of trust between sellers and buyers is paramount.</p>
<h2>Rating the sellers’ ratings</h2>
<p>E-platforms have traditionally tackled this issue by setting up a system through which buyers can rate sellers. The idea is that sellers with strong reputations are those less likely to trick buyers by selling items whose features and/or quality do not correspond to the ones advertised. Having high feedback scores is nowadays perceived as paramount to become a successful seller. Similarly, the ability to gather as many sellers as possible with high reputation scores is regarded as crucial for the success of e-platforms. But what is the real value of reputation scores in e-trading? Is it possible that the role of sellers’ reputation is somehow over-emphasized?</p>
<p>In a <a href="https://www.sciencedirect.com/science/article/pii/S0167718717302151">March 2019 research article</a>, co-authored with Enzo Dia from the University of Milan Bicocca, we try to answer these questions by analysing eBay auctions of used but remanufactured electronic items. These auctions present the features of standard auctions: they all have a winning price, and often come with money-back guarantees and/or warranties for any malfunction of the items sold. However, auctions of refurbished items have one unique feature: the refurbishment can be carried out either by vendors with the sponsorship (the approval) from the original manufacturer or by vendors without such sponsorship.</p>
<p>Buyers usually take the presence of such sponsorship as a signal of a high-quality refurbishment, which ultimately stands on the reputation of the original manufacturer. Thus, when non-manufacturer-approved sellers carry out the refurbishment, the original manufacturer cannot guarantee the quality of the process. In this case, the sellers’ feedback scores capture two different types of reputation: the reliability in the disclosure of truthful features of the items on sale, and the ability to deliver refurbishment of high quality. On the contrary, when auctioned items undergo a refurbishment by manufacturer-approved vendors, the original manufacturers guarantee the quality of the process. In this last case, the information of feedback scores is limited to how reliable vendors are in the disclosure of items’ features that correspond to reality.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/264916/original/file-20190320-93032-1ntx0gp.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/264916/original/file-20190320-93032-1ntx0gp.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=456&fit=crop&dpr=1 600w, https://images.theconversation.com/files/264916/original/file-20190320-93032-1ntx0gp.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=456&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/264916/original/file-20190320-93032-1ntx0gp.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=456&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/264916/original/file-20190320-93032-1ntx0gp.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=572&fit=crop&dpr=1 754w, https://images.theconversation.com/files/264916/original/file-20190320-93032-1ntx0gp.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=572&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/264916/original/file-20190320-93032-1ntx0gp.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=572&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">You really want that guitar once used by Nine Inch Nails. Now might be the time – or not.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/shannonpatrick17/4151240528">Shannon Ramos/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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<h2>Do guarantees help?</h2>
<p>To measure the importance of feedback scores, as well as the presence of money-back guarantees, we studied how these last impact on the winning prices of auctions. The rationale here is the following: auctions that feature high feedback scores and money-back guarantees offer greater protection against the possibility that sellers pass off items with characteristics and/or quality not corresponding to those advertised. If the presence of high feedback scores and money-back guarantees is perceived by buyers as something able to reduce the risk of buying unwanted items, then buyers should be willing to pay higher auction prices.</p>
<p>We investigate whether the above dynamics hold using a set of almost 1,000 eBay auctions of remanufactured electronic items. Our empirical results show that, quite surprisingly, the role of feedback scores is rather limited. We find that buyers perceive feedback scores as important, but only when the refurbishment is carried out by non-manufacturer-approved sellers. In this case, the lack of sponsorship by the original manufacturer makes the ability of sellers to deliver high-quality refurbishment of items uncertain.</p>
<p>As a result, the best buyers can do to make a guess on such ability is to resort to sellers’ feedback scores. When, instead, manufacturer-approved vendors carry out the refurbishment, buyers do not perceive the information conveyed by feedback scores as something valuable. This is the case where the ability of sellers to deliver high-quality refurbishment is certified by the original manufacturer so that the information content of feedback scores becomes limited to the sellers’ reliability in the disclosure of truthful features of the items on sale. It is this last type of information that buyers regard as valueless.</p>
<h2>Price matters</h2>
<p>The second important result is that buyers perceive feedback scores as important, but only for items of low value. More specifically, when we partition our sample of auctions according to the value of the transactions, we show that feedback scores command a premium on auction prices limitedly to items of low value. On the contrary, we find that buyers perceive money-back guarantees as important, but only for the cohort of more expensive goods. This last result is even more disappointing than the previous ones, as it suggests that when the value of the auctioned items increases, buyers tend to dismiss the information content of feedback scores to attach greater value to alternative – and more radical – methods to fix the information advantage of sellers such as money-back guarantees.</p>
<p>Overall, we find the importance of feedback scores greatly limited as they count only for low-value auctions that feature non-manufacturer-approved vendors. This is at odds with the widespread belief that the sellers’ reputation is a key element in e-retail markets. Of course, these results do not mean that the reputation of sellers is not important. On the contrary, they only suggest that feedback scores – as currently designed – might not be as relevant as previously thought. Reputation scores still have, in all likelihood, an important role in the functioning of e-platforms, but they have to be re-designed in such a way that they can convey more and better aspects of sellers’ past performances. For instance, the disaggregation of feedback scores from one single figure into multiple indicators – better able to account for specific aspects of e-retail transactions – seems to be a promising way forward to boost the importance of reputation scores.</p>
<hr>
<p><em>Casalin and Dia, <a href="https://www.sciencedirect.com/science/article/pii/S0167718717302151">“Information and reputation mechanisms in auctions of remanufactured goods”</a>, International Journal of Industrial Organization 63 (2019) 185–212.</em></p><img src="https://counter.theconversation.com/content/111050/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Fabrizio Casalin ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>In the immaterial world of online sales, how important are sellers’ reputation? An analysis of 1,000 eBay auctions provides an unexpected answer: not very.Fabrizio Casalin, Associate Professor of Finance, IÉSEG School of ManagementLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1118222019-02-26T19:11:52Z2019-02-26T19:11:52ZRegulating Facebook could hinder small businesses with overseas customers<figure><img src="https://images.theconversation.com/files/260861/original/file-20190225-26162-9q1jlj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Australian Competition and Consumer Commission is currently conducting an inquiry into digital platforms.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/new-york-usa-september-21-2018-1185234664">Shutterstock</a></span></figcaption></figure><p>Digital platforms provide a host of challenges for governments. Questions about how to best protect privacy, democracy, and speech online become more pressing every year. </p>
<p>But policies that affect online platforms also affect international trade. Many Australian small businesses rely on digital platforms to stay on par with their international competitors.</p>
<p>As Australia starts tackling the challenges wrought by digital platforms, policymakers should be careful not to undo the good things that stem from an evermore connected world. That includes the critical role of these platforms in helping retailers sell their products to overseas customers.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-law-is-closing-in-on-facebook-and-the-digital-gangsters-112232">The law is closing in on Facebook and the 'digital gangsters'</a>
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</em>
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<h2>Platforms facilitate exports</h2>
<p>As my <a href="https://www.mercatus.org/publications/trade-and-immigration/businesses-facebook-and-propensity-export-australia">new research</a> with colleague Danielle Parks shows, digital platforms appear to significantly reduce the economic distance and trade costs between buyers and sellers.</p>
<p>Take Facebook, for example. Facebook is both a social networking platform and digital market platform, where Facebook’s Marketplace helps business owners connect with potential customers. </p>
<p>The social networking interface allows buyers and sellers to message each other and exchange information about what the seller has, and what the buyer wants. Meanwhile, Marketplace features like identity verification and buyer ratings help to facilitate connections more quickly, and with more trust, than might otherwise be possible. </p>
<p>There isn’t a lot of large-scale data on cross-border e-commerce, so researchers must get creative to study digital platforms and trade. The findings are extraordinary.</p>
<p>One <a href="https://www.etsg.org/ETSG2013/Papers/206.pdf">study</a> found that 97% of US-based eBay sellers export product to overseas buyers. Another <a href="https://econpapers.repec.org/paper/cprceprdp/9094.htm">found</a> the “economic effect of distance” to be 65% smaller on eBay. In other words, the digital platform reduces the challenges of selling to people in other countries.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/innovative-e-commerce-approaches-can-help-small-businesses-in-africa-96145">Innovative e-commerce approaches can help small businesses in Africa</a>
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<p>Research conducted by PayPal <a href="https://publicpolicy.paypal-corp.com/sites/default/files/policy/PayPal-Policy-Paper_Democratizing-Globalization.pdf">showed</a> that 79% of US small businesses on its platform sell to foreign markets. And PayPal merchants that exported, outperformed businesses in general. Interestingly, that finding held for coastal and non-coastal businesses, and for rural and urban businesses alike.</p>
<p>In our <a href="https://www.mercatus.org/system/files/mcdaniel_and_parks_-_policy_brief_-_digital_platforms_small-_and_medium-sized_businesses_-_v1.pdf">new study</a>, we surveyed Australian businesses on Facebook. We found that those with a Facebook presence were 63% more likely to export their products internationally than other businesses. The propensity to export was higher across all business sectors and nearly all company sizes.</p>
<p>This emerging pattern shows how world markets are opening up to smaller businesses that might not otherwise be able to compete with their larger, multinational rivals. These findings can partly be attributed to export-prone firms being more likely than others to use digital platforms. But there is no question that the platforms can also enable trade. </p>
<p>Most governments recognise the need to dismantle barriers to foreign market access, and any new policies regarding digital platforms should not make it harder for small and medium sized businesses to engage in trade.</p>
<h2>How regulation could hurt small businesses</h2>
<p>The Australian Competition and Consumer Commission (ACCC) is currently conducting an inquiry into digital platforms at the request of the treasurer. </p>
<p>The ACCC’s <a href="https://www.accc.gov.au/focus-areas/inquiries/digital-platforms-inquiry/preliminary-report">preliminary report</a> recognises how digital platforms have revolutionised the ways consumers and businesses communicate with one another. The report also highlights concerns over data privacy and the influence of bad actors producing and spreading misinformation.</p>
<p>The final report, expected in June, will make policy recommendations that aim to address these concerns. But these policies could also inadvertently threaten the revenue streams of businesses that advertise on these platforms or that use them to facilitate online sales.</p>
<p>Restrictions on the cross border flow of consumer information could interfere with everyday business practices. For example, a key advantage of e-commerce, especially for small businesses, is using search engine techniques to reach larger audiences, and target potential customers. So, search engine restrictions could limit the way businesses target customers with advertising, therefore limiting a business owner’s ability to reach customers abroad. </p>
<p>Other regulations could restrict business owners from storing the personal information of customers – such as credit card information, consumer preferences and purchase history. That would then limit businesses in how they interact with customers at home and abroad. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/taking-on-big-tech-where-does-australia-stand-100321">Taking on big tech: where does Australia stand?</a>
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</em>
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<h2>What’s happening at the moment</h2>
<p>Australia is not alone in considering these tough issues. The landscape of digital data flows, data privacy, and e-commerce is a work in progress for governments across the globe. </p>
<p>The EU recently enacted data privacy regulation called the General Data Protection Regulation (<a href="https://eugdpr.org/">GDPR</a>), which is designed to: </p>
<blockquote>
<p>[…] fundamentally reshape the way in which data is handled across every sector, from health care to banking and beyond. </p>
</blockquote>
<p>Meanwhile, the United States Congress will likely consider <a href="https://www.axios.com/midterms-will-shape-the-internets-new-privacy-rules-84784d2c-2777-4caf-a0e6-8807d126a306.html">new internet privacy legislation</a> this year.</p>
<p>Provisions on digital data flows have been included in major recent international trade agreements. Both the United States-Mexico-Canada Agreement (<a href="https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement">USMCA</a>) and the Trans Pacific Partnership (<a href="https://theconversation.com/the-senate-is-set-to-approve-it-but-what-exactly-is-the-trans-pacific-partnership-104918">TPP</a>) bar data localisation requirements. That means foreign companies would only be allowed to work in a country if they built out or leased separate data infrastructures in that country – a costly endeavour, especially for smaller businesses. </p>
<p>On the other hand, USMCA and TPP do not allow participating countries to require that platforms disclose their source code or algorithms. These provisions do not necessarily preclude countries from adopting privacy protections, but they do make it easier for platforms like Facebook to operate without fear that they will be asked to handover important intellectual property.</p>
<p>As the government considers the Australian Competition and Consumer Commission report, one thing should be clear: any policy changes should not overlook the role of these platforms in helping Australian small businesses sell goods to customers in the global marketplace.</p><img src="https://counter.theconversation.com/content/111822/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christine A McDaniel does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Any discussion about regulating social platforms should recognise how new policies could reduce the bottom line of small businesses.Christine A McDaniel, Senior Research Fellow, George Mason UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/769462017-05-01T22:28:18Z2017-05-01T22:28:18ZGoogle, Facebook fall into line on tax, but eBay remains defiant<p>Under pressure from the Australian Tax Office, Google and Facebook have begun to bring their revenue onshore to be taxed. eBay remains recalcitrant, still deeming its Australian business to be a Swiss business and thereby avoiding millions in income tax and GST.</p>
<p>It is multinational reporting season once again and the early signs are the government’s multinational tax avoidance laws are starting to work. But the world’s largest corporations are still paying a fraction of their fair share of tax in this country.</p>
<p>Until this year, Google and Facebook entertained a corporate structure that booked the billions of dollars of revenue they made in Australia directly offshore. However, eBay is still blithely pretending it doesn’t have an Australian business and that the billion dollars a year it makes from operating its online auction house in this country – through which Australians buy and sell things with other Australians in Australia – is really the business of an entity residing at 15 Helvetiastrasse, Bern, Switzerland. </p>
<p>According to <a href="http://www.michaelwest.com.au/ebay-scores-own-goal-on-tax/">its accounts</a>, the latest for the year to December 2016, eBay Australia is still masquerading as being in the business of “the recommendation of market penetration strategies” on behalf of eBay International AG.</p>
<p>So it is that every cent of the $59 million that eBay disclosed as its cash-flow statement for 2016 came from related parties, mostly for “rendering of services”. On this, eBay paid $1.9 million in tax after ratcheting up its costs by $13 million to wipe out most of the $20 million uplift in cashflow. The average salary at eBay, if the accounts can be believed, is $312,553 – 109 employees, according to the directors’ report, getting $34.1 million.</p>
<p>Mind you, according to the directors’ report, these 109 people are engaged in carrying out the principal activities of the company, which are “the recommendation of market penetration strategies, advertising and promotion activities”. </p>
<p>Gobbledygook, but the numbers are irrelevant anyway. The estimated billion dollars or more which eBay is said to make in Australia is not even included in its financial statements, just the revenue from its secretive associates. Moreover the accounts are not consolidated, according to the notes, rendering the entire disclosure a farce. Auditor is PwC.</p>
<p>Funnily, though, the cover page Form 388, authenticated by EY, talks about “consolidated revenue” and “consolidated gross assets” – despite the fact that PwC says the accounts are not consolidated.</p>
<p>So eBay is the quintessence of the undisclosed agency, a <a href="http://www.michaelwest.com.au/game-changer-for-oil-giants-and-multinational-tax-avoiders/">puppet regime designed to whisk Australian profits offshore</a> to a tax haven. The shadow directors are in Bern and the ultimate parent eBay Inc is in the US.</p>
<p>Over the past 15 years, eBay has dodged GST and paid income tax of just $8 million (almost one-fifth of its bill for “professional fees” at $38 million), despite its billions of dollars in cash-flow.</p>
<h2>Positive signs of change</h2>
<p>Focusing on more positive developments on the multinational tax scene, arch-tax avoider Google Australia and New Zealand is now recognising that a portion of the profits it makes in Australia are in fact Australian rather than Singaporean.</p>
<p>Industry observers believe Google makes about $3 billion in sales from its advertising business here. Until this year, its only revenue has come from three related parties via service arrangements. Now, with the introduction of the multinational anti-avoidance legislation, Google has recognised roughly one-third of its Australian revenue as Australian.</p>
<p>In the broader context it is worth considering the <a href="http://www.michaelwest.com.au/google-and-fairfax-playing-a-different-tax-game/">effect of the digital revolution on Australia’s tax base</a>. </p>
<p>Where the TV networks, News Ltd (though belligerent on the tax front) and Fairfax Media once paid hundreds of millions of dollars a year in tax collectively, they are now struggling to make a profit. In their place, it is estimated Facebook and Google now pick up 80% of the advertising dollar in this country but they pay negligible tax. </p>
<p>Globalisation and the internet are similarly challenging Australia’s revenue base in retail, financial services and other sectors. Paypal, for instance, eBay’s corporate cousin, paid more than $1 billion of its $1.2 billion in revenues to its parent and associates in Singapore over the nine years to 2014 thanks to a “service agreement”.</p>
<p>Looking at the accounts, thanks to the new tax law, revenue rose from $498 million to $1.14 billion. Sales and marketing expenses, however, recognised for the first time at $324 million, knocked profits about. Profit rose from $50 million to $121 million on which tax expense was $16 million, up from $3 million.</p>
<p>Actual tax paid as per the cash-flow statement was $41 million, up from $16 million. So, like Apple, Google is beginning to pay significant amounts of tax, although <a href="http://www.michaelwest.com.au/google-paying-a-fraction-of-the-tax-in-australia-it-should/">still way short of the mark</a>, and it appears to have bloated its cost base here as much as humanly possible. Assuming group sales are heading towards $3 billion (Google booked $882 million in advertising revenue), the real income tax number ought to have nine digits.</p>
<p>For its part, Facebook booked revenue of $327 million, ten times the $33.5 million recorded in the the previous year. After forking out $271 million to related parties for the “purchase of advertising inventory”, it made a profit of just $6.3 million on which it paid $3.4 million in tax.</p>
<p>Under its previous structure, Facebook sales were booked to an associate in Ireland. For the purposes of reporting as little as possible, the company even won an exemption from the corporate regulator when it <a href="http://www.michaelwest.com.au/laws-of-the-land-make-facebook-fantasies-come-true/">claimed to be</a> a “Small Pty Company Controlled By a Foreign Coy Which is Not Part of Large Group”. That its foreign parent was valued at more than $170 billion on Wall Street didn’t seem to matter.</p>
<p>Now, Facebook has declared itself to be a reseller of local advertising inventory. Both Google and Facebook are audited by EY.</p>
<p>None of these companies operate to maximise profits for the benefit of their Australian entities. All have small, token boards of directors. All operate in the interests of their foreign overlords and should be taxed as agencies.</p>
<p>It is a good thing the authorities are catching up with multinational tax lurks. This would not have occurred without public outrage and dissent. Nor would it have occurred without the <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Corporatetax45th">Senate Inquiry into Corporate Tax Avoidance</a> in 2015, which thrust the issues into public view. They should keep this Senate committee rolling with biannual investigations where corporate leaders are held to account and subject to full public scrutiny. After all, directors have a fiduciary duty to perform in the interests of their companies, not some tax officer in California.</p>
<p>Further, the architects of multinational tax avoidance – EY, Deloitte, PwC and KPMG – <a href="http://www.michaelwest.com.au/george-pell-silences-pwc-ey-kpmg-deloitte/">ought to be subject to greater disclosure requirements</a> rather than operating as murky partnerships whose partners pontificate to government on tax policy while advising their big clients how best not to pay tax, or “leakage” as they call it in the trade.</p>
<hr>
<p><em>This column, co-published by The Conversation with <a href="http://www.michaelwest.com.au/">michaelwest.com.au</a>, is part of the <a href="https://theconversation.com/au/topics/democracy-futures">Democracy Futures</a> series, a <a href="http://sydneydemocracynetwork.org/democracy-futures/">joint global initiative</a> with the <a href="http://sydneydemocracynetwork.org/">Sydney Democracy Network</a>. The project aims to stimulate fresh thinking about the many challenges facing democracies in the 21st century.</em></p><img src="https://counter.theconversation.com/content/76946/count.gif" alt="The Conversation" width="1" height="1" />
<h4 class="border">Disclosure</h4><p class="fine-print"><em><span>Michael West has received funding from GetUp and the Tax Justice Network to analyse the tax affairs of 20 top multinational companies operating in Australia.</span></em></p>eBay still deems its Australian business to be a Swiss business and thereby avoids millions in income tax and GST.Michael West, Adjunct Associate Professor, School of Social and Political Sciences, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/764572017-04-21T01:25:23Z2017-04-21T01:25:23ZImposing GST on low-value imports doesn’t level the playing field<p>The government wants to extend GST to imported online goods under A$1000, effective from 1 July 2017, with <a href="http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F345ee0b5-7f9d-47ea-a37c-53d1b10edff0%2F0030%22">Treasurer Scott Morrison stating</a> it will “establish a level playing field for our domestic retailers”. But the proposed legislation doesn’t do this. Rather, it unfairly imposes GST on goods purchased from overseas sellers, that wouldn’t be subject to GST if purchased from an Australian seller.</p>
<p>The government also hasn’t cleared up how the collection will be adequately enforced. Without appropriate enforcement, collecting more revenue from this tax seems unlikely.</p>
<p>Currently, low-value imports (those with a customs value of A$1,000 or less) are exempt from GST. If the legislation is passed, overseas vendors who sell more than A$75,000 of low-value goods to Australian consumers would be required to register for GST, and collect and remit GST on low-value goods to the ATO. </p>
<p>Those imports will continue to be stopped at the border with any GST, customs duty, and associated fees paid to Australian Border Force by the importer before the goods are released. </p>
<p>For sellers of low-value goods it will mean that an overseas supplier of both low and high value goods will be subject to two separate tax regimes. The requirement to collect GST will apply only to low-value goods.</p>
<h2>Online marketplaces and mail forwarding services</h2>
<p>The new law will also apply to online marketplaces such as eBay and “redeliverers” - businesses that forward goods to Australia from overseas companies. For goods purchased through an online marketplace, the marketplace rather than the seller will be treated as the supplier. Similarly, if low-value goods are delivered to Australia by a redeliverer, they will be considered to be the supplier for GST purposes. </p>
<p>While extending the GST to these goods is meant to level the playing field between overseas and Australian vendors, treating the online marketplace or mail forwarder as the supplier of goods is inconsistent with the treatment of domestic transactions. </p>
<p>As eBay has stated in their <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/GSTLowValueGoods/Submissions">submission to the Senate Committee</a>: “eBay is not a seller. eBay is a third-party online marketplace that simply connects buyers and sellers”. </p>
<p>For Australian vendors who sell items on eBay, it’s the individual seller who is responsible for collecting and remitting GST on products they sell (if they are required to be registered). A seller who uses eBay, but isn’t carrying on an enterprise or does not meet the A$75,000 turnover threshold, isn’t required to be registered and would not be required to collect GST on their sales. </p>
<p>However, the proposed legislation does not treat overseas vendors in this way, by treating online marketplaces and mail forwarding services as the supplier of goods. <a href="http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22chamber%2Fhansardr%2F345ee0b5-7f9d-47ea-a37c-53d1b10edff0%2F0030%22">The Treasurer stated that</a>: </p>
<blockquote>
<p>Including online marketplaces ensures that only a limited number of entities need to collect the GST, rather than the multitude of small, individual vendors making supplies through these online marketplaces that compete with Australian retailers here in Australia. </p>
</blockquote>
<p>With all due respect to Scott Morrison, he seems to have missed the point that small, individual vendors should not (if their turnover of low-value goods into Australia is less than A$75,000) be required to collect GST merely because they use an online marketplace. </p>
<p>EBay has gone as far as stating in their submission that: “Regrettably, the Government’s legislation may force eBay to prevent Australians from buying from foreign sellers”. This is because they would not be able to comply with the requirements imposed under the new legislation. </p>
<h2>Compliance concerns</h2>
<p>Despite the legislation being intended to come into effect on 1 July of this year, it is still unclear <a href="https://theconversation.com/three-holes-in-hockeys-plan-to-levy-gst-on-overseas-purchases-46460">how the new system will be adequately enforced</a>. </p>
<p>At the moment, information displayed on international mail declarations doesn’t indicate whether the overseas supplier is registered (or required to be registered) for GST. It also doesnt say whether GST has been collected, and whether it is being correctly remitted to the ATO. Even if this information was readily available, it’s not clear how the ATO would deal with non-compliant entities. </p>
<p>If it was determined that GST had not been charged and collected by the overseas supplier of the low-value goods, there is nothing in the proposed legislation that would allow the GST to be collected from the importer (instead of the supplier) when the goods enter Australia. However, attempting to enforce an Australian tax debt against a non-compliant overseas vendor would be a complex, costly, and likely fruitless endeavour. </p>
<p>Consumer advocate group <a href="https://www.choice.com.au/shopping/online-shopping/buying-online/articles/gst-overseas-website-block">Choice has expressed concern</a> that the government would use powers under the Telecommunications Act to block the websites of non-compliant entities. However, <a href="http://www.news.com.au/finance/business/retail/government-mulls-online-shopping-lockouts-in-gst-crackdown/news-story/19e3cf3d3eb533dcc93293cfeac88db1">Scott Morrison has indicated</a> that the government has no intention of using this power. </p>
<p>Concerns regarding enforcement have been echoed in a number of submissions, including the <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/GSTLowValueGoods/Submissions">Taxation Institute of Australia and Amazon</a>. Both highlight the fact that lack of enforcement may simply encourage Australian consumers to purchase goods from non-compliant overseas entities that are not charging GST.</p>
<p>By treating online marketplaces and mail forwarding services as the supplier of goods, the proposed legislation does not treat overseas vendors in the same way as domestic vendors. The tax will only be effective if the system for collecting GST on imports can be adequately enforced. Without appropriate enforcement, high levels of compliance seems unlikely. A lack of compliance will continue to leave Australian retailers at a disadvantage, with only minimal increase in GST revenue.</p><img src="https://counter.theconversation.com/content/76457/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kathrin Bain does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The governments move to include low-value online bought goods in the GST doesn’t treat overseas and local sellers in the same way.Kathrin Bain, Lecturer, School of Taxation & Business Law, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/598072016-05-23T02:47:34Z2016-05-23T02:47:34ZMyer and eBay’s virtual reality shopping turns looking into seeing<figure><img src="https://images.theconversation.com/files/123478/original/image-20160523-9551-n7nvuv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The virtual reality service incorporates both vision and touch.</span> <span class="attribution"><span class="source">eBay</span></span></figcaption></figure><p>Department store Myer and online shopping giant eBay have teamed up to offer something different to consumers in a bold bid to change the way we shop, interact with, research and purchase products. </p>
<p>Their creation of a <a href="http://media.ebay.com.au/world%E2%80%99s-first-virtual-reality-department-store">virtual reality (VR) department store</a> – a place where consumers can shop if they are unable to visit Myer’s bricks and mortar stores - enables them to challenge the retail status quo.</p>
<p>Whether it came about by chance, intuition or meticulous research, the new offering is an experiment in sensory marketing. This is an area of marketing that combines perception, sensation and cognition.</p>
<h2>How we use our senses to shop</h2>
<p>There’s been a recent <a href="https://hbr.org/2015/03/the-science-of-sensory-marketing">rush towards the field of sensory marketing</a>, which was first pioneered by Professor <a href="http://www.aradhnakrishna.com/">Aradhna Krishna</a>. </p>
<p>Krishna <a href="http://www.sciencedirect.com/science/article/pii/S1057740811000830">defines sensory marketing</a> as “marketing that engages the consumers’ senses and affects their perception, judgment and behaviour”. Essentially, sensory marketing considers how a consumer sees, tastes, touches, smells and even hears the product and/or service experience. Sounds like common sense, but the uptake by retailers and managers to incorporate sensory elements into their products, stores and exchange designs has been slow. This is intriguing considering the plethora of emerging evidence on the power sensory modalities have on our decision making.</p>
<p>We use our senses to navigate our world and shape our decisions. Incorporating sensory elements into physical settings may be relatively easy, but an online environment presents a much harder, yet equally as important challenge. The Myer/eBay initiative is definitely a step in the right direction. </p>
<p>The service incorporates both vision and touch. It facilitates a means for consumers to connect with their brands in a new and novel way. I can hear you saying, “Don’t we look at products all the time normally?” “How are you touching the products?” There are two answers. First, customers have to hold the VR system in their hands and against their face. By doing this they are physically connecting their skin receptors to the VR department store. This could facilitate what is known as an <a href="https://www.princeton.edu/%7Ekahneman/docs/Publications/Anomalies_DK_JLK_RHT_1991.pdf">endowment effect</a>. </p>
<p>Secondly in terms of vision, customers are looking at products in a very different way. They have a deep and sustained focus, something they have unlikely embraced before. <a href="http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3956003/">Research suggests</a> that a deeper and longer visual fixation on products and brands during visual search may create positive connections in consumers’ minds. What this means for purchase behaviour in the VR store only time can tell.</p>
<h2>Where to next?</h2>
<p>With the deep focus required to operate the VR department store, opportunities are available to expose consumers to subliminal imagery which could be used to <a href="https://faculty.fuqua.duke.edu/%7Egavan/bio/GJF_articles/apple_ibm_jcr_08.pdf">trigger a favourable response</a>. Further sensory opportunities exist by providing congruence of sight, sound and touch during the shopping experience. It’s likely smartphone manufacturers will soon start building eye tracking technology into their devices so this type of shopping becomes commonplace. </p>
<p>Initially at least, the VR department store may see a reciprocity effect – where consumers who have received the free eBay VR device return in kind by spending hours in the virtual store and shopping above and beyond their discretionary budgets. The fear of course is the novelty will wear off quickly.</p>
<p>The challenge for the Myer/eBay alliance is to maintain any interest they attract and convert this interest into a real return on investment. In terms of online stores, maybe we have always been looking, now for the first time we may be seeing.</p><img src="https://counter.theconversation.com/content/59807/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David P. Harris does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A new shopping experience from two retailing giants shows companies are embracing sensory marketing.David P. Harris, PhD Student - Sensory Marketing and Consumer Psychology / Sessional Lecturer in Marketing, CQUniversity AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/406182015-04-21T20:43:48Z2015-04-21T20:43:48ZThe last two digits of a price can signal your desperation to sell<figure><img src="https://images.theconversation.com/files/78838/original/image-20150421-9008-181q238.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The last two digits of a product's price sends signals about how badly you hope to sell. </span> <span class="attribution"><span class="source">1.99 via www.shutterstock.com</span></span></figcaption></figure><p>While someone’s bargaining position can be shaped by competition, we economists know that there is a big gray area in our ability to predict negotiated prices. </p>
<p>Competitive options for buyers and sellers can define a limit beyond which they will not go, but there is still a range of prices that fall within those limits. Within that range, clearly sellers would like a higher price, while buyers would like a lower one, so each has an incentive to signal to the other their willingness to be a tough negotiator.</p>
<p>Sometimes, however, you might want to send a signal that you might be willing to be less tough. Why? Because negotiations take time, and you might want to get a deal done quickly. For instance, you may be moving to another city and wish to sell your house in a hurry. </p>
<p>The usual means by which such a signal could be sent is to simply lower your starting price. But for some goods — where quality is hard to observe, such as real estate — lowering the price may be difficult to do, at least in small increments. This is the traditional asymmetric information or adverse selection story, where if a seller has a product of high quality, they can’t use higher prices to convince the market that they are still not a low-quality seller in disguise. </p>
<p>So how else would you signal your willingness – or unwillingness – to be “flexible?” When there are sellers around with differing levels of patience, both signals are desirable for those who know how to use them.</p>
<p>In <a href="http://faculty.haas.berkeley.edu/stadelis/round.pdf">a new paper</a>, Matt Backus, Thomas Blake and Steve Tadelis look at this issue within the confines of eBay’s structured negotiation platform. While we often associate eBay with auctions (rather than straight out sales), that hasn’t been eBay’s main business for about a decade. Instead, most trades are listed for a specific or “buy it now” price, and the seller may give you the option of making them an alternative offer. </p>
<p>So a seller of an iPhone may list a price of $1,000, and someone might come back with a counteroffer of $800, to which the seller could then accept or make a new offer. This could go on for about three rounds (eBay rules) and may last about a week. </p>
<p>But if the seller wanted a quicker negotiation, what could he do? Backus, Blake and Tadelis discovered an interesting way to do just that, which is summarized in the following chart. </p>
<p>The chart shows that when the posted initial price is of a round number (the red dots), like $1,000, the average counteroffer is much lower than if it is a non-round number (the blue circles), like $1,079. For example, the graph suggests that you can actually end up with a higher counteroffer if you list $998 rather than $1,000. In other words, you are better off initially asking for a lower price if price was all you cared about.</p>
<p>Backus et al postulate that what is going on here is “cheap talk” – that is, an easy-to-make statement that may be true or untrue with no consequences for dishonesty – and not an otherwise reliable signal. There are some sellers who don’t just care about price and, absent any other way of signaling that to buyers, they set their price at a round number. Alternatively, you can think that the more patient sellers are using non-round numbers to signal their toughness. Either way, the last two digits of the price is cheap talk. </p>
<p>The rest of the paper does the econometrics to back all this up and is (except for one really interesting thing that I’ll get to in a moment) as robust as the graph suggests. End your price with “00” and you receive offers that are 5% to 8% lower, more likely to finish six to 11 days sooner and 3% to 5% more likely to sell at all. This is pretty interesting because the last two digits of a price essentially tell you nothing about anything else. Nor do they make much of a difference to the price. This is the first paper I am aware of that uncovers a plausible cheap talk equilibrium; that is, where people use a simple unverifiable statement and it is believed as intended. </p>
<p>But wait, there’s more. The authors wanted to see if their analysis would work in other markets and whether they could guess what the cheap talk prices would be. </p>
<p>While we know that round numbers seem to be the focal point, we don’t know that for sure. And so they checked. And what they found was that while the effect they observed didn’t happen for all other prices, it did arise for prices that ended in 99! These days, those prices are the “normal” ones used at any grocery store or shopping mall and, as it turns out, send the same type of signal as the “00” prices. If you look at the graph closely, you can kind of see that.</p>
<p>Does this arise elsewhere? The authors grabbed some real estate data and here are the results:</p>
<p>There is it again. So if you want to sell your house quickly, pick a round number. As it turns out, real estate agents then understand the signal. Alternatively, if you want to sell for a higher price and are willing to wait, your agent will advise you to pick an odd one. </p>
<p>This is one of those things I certainly didn’t know about, but it is clear that enough people in the market did. One wonders what other cheap talk signals lie in our economics future.</p><img src="https://counter.theconversation.com/content/40618/count.gif" alt="The Conversation" width="1" height="1" />
While someone’s bargaining position can be shaped by competition, we economists know that there is a big gray area in our ability to predict negotiated prices. Competitive options for buyers and sellers…Joshua Gans, Professor of Strategic Management, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/321222014-09-25T05:28:49Z2014-09-25T05:28:49ZHome Depot hack shows online card fraud still as easy as shooting fish in a barrel<p>Imagine if UK banks decided to send out new credit cards to all their customers, but they were all “lost in the post” and the details ended up for sale on some dubious website. The <a href="http://online.wsj.com/articles/fraudulent-transactions-surface-in-wake-of-home-depot-breach-1411506081">recently discovered hack at huge US firm Home Depot</a> was of that sort of scale – at least 56m credit and debit card details could have been compromised from the company’s entire chain of more than 2,000 stores across the US, and others in Canada, Guam, Mexico and Puerto Rico.</p>
<p>The risk to businesses and individuals from theft of passwords and financial details online is growing. The attack on Home Depot, apparently conducted by installing malware on <a href="http://www.businessweek.com/articles/2014-09-18/home-depot-hacked-wide-open">vulnerable point-of-sale computers</a>, looks bigger even than the attack last year on another huge US retailer, Target, that <a href="http://techcrunch.com/2014/03/13/target-knew-about-credit-card-hack-for-12-days-before-reacting/">exposed an estimated 40m card details</a>. It seems that companies have set up a whole lot of back-end defences defending their data, but have forgotten that once the intruder has a touch-point on the network, especially external to their own systems, they can often go undetected.</p>
<p>In one of the largest corporate thefts ever, online auction giant <a href="http://www.reuters.com/article/2014/05/23/us-ebay-cybercrime-idUSBREA4M0PH20140523">eBay was hacked</a> in May this year, and later admitted that data from all 145m user accounts had been accessed. The intruders managed this by identifying and then compromising the user accounts of senior staff with privileged access to the company’s systems. There are clearly significant risks to firms conducting their business on the web, and the importance of keeping a company’s crown jewels – its data – safe seems not to have sunk in.</p>
<h2>Faking it on eBay</h2>
<p>The site has faced further problems recently from the front end rather than the back. Fake auction listings have been written to take advantage of the site’s lax restrictions on the use of HTML and Javascript code in listings, <a href="http://www.bbc.co.uk/news/technology-29310042">allowing attackers to insert malicious code</a>, known as a cross-site scripting attack (XSS). </p>
<p>Using this and other means to hijack a users’ account – perhaps one with 100% positive feedback and hundreds of sales – the attackers use these to set up convincing fake listings containing malicious code that redirects users to convincing pages and prompts them to enter login credentials or credit card details. These are funnelled off to the attackers, yet all the while the user is unaware than anything untoward is happening. This problem has existed since February 2014.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/nRFKJTNU0E8?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">.</span></figcaption>
</figure>
<h2>Malware scam</h2>
<p>It’s likely that the malware used to obtain card details from Home Depot ran from April 2014 to the beginning of September 2014 before it was finally detected. It’s now been found and removed, but that’s no consolation for customers who have already been affected.</p>
<p>The lesson learned must be to reduce the time it takes to detect a threat and to respond quickly. As the back-end of financial services become more secure, hackers will focus more on point-of-sale computers or other front-ends such as websites, so retailers need to spend more effort and resources in proactively detecting exploits and vulnerabilities, as much as they do on data protection.</p>
<p>This breach is expected to cost Home Depot US$62m, as good a demonstration as any that money spent on security is a good investment. Such spectacular failures as these can do untold damage to a brand, leading to loss of respect, trust and trade. For example, the attack on <a href="http://www.theguardian.com/technology/gamesblog/2011/apr/27/playstation-network-hack-sony">Sony’s PlayStation Network</a> in 2011 compromised 77m user accounts, is thought to have cost the firm US$170m, and the <a href="http://www.vg247.com/2011/04/27/supposed-hacker-chat-logs-reveal-stunning-psn-security-lapses/">subsequent revelations of lax security</a> and poor system design caused major damage to the brand.</p>
<h2>From one Target, to the next</h2>
<p>The theft of card details from Target led to a large number of them appearing for sale on the rescator.cc site, which security researcher Brian Krebs has <a href="http://krebsonsecurity.com/2013/12/whos-selling-credit-cards-from-target/">traced to Ukraine</a>. Stolen card details on the site can command prices up to US$100 each and it has become one of the largest clearinghouse for such data, with many hundreds of thousands of cards sold in a single batch. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/59922/original/f2bx9dfp-1411567368.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/59922/original/f2bx9dfp-1411567368.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1024&fit=crop&dpr=1 600w, https://images.theconversation.com/files/59922/original/f2bx9dfp-1411567368.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1024&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/59922/original/f2bx9dfp-1411567368.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1024&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/59922/original/f2bx9dfp-1411567368.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1287&fit=crop&dpr=1 754w, https://images.theconversation.com/files/59922/original/f2bx9dfp-1411567368.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1287&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/59922/original/f2bx9dfp-1411567368.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1287&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Are your details in one of these bubbles?</span>
<span class="attribution"><a class="source" href="http://www.informationisbeautiful.net/visualizations/worlds-biggest-data-breaches-hacks/">Information is Beautiful</a></span>
</figcaption>
</figure>
<p>For a graphic indication of just how big a problem these lapses in security and mass theft of details have become, take a look at this <a href="http://www.informationisbeautiful.net/visualizations/worlds-biggest-data-breaches-hacks/">beautiful and detailed interactive graphic</a> at Information is Beautiful. While not as large as the loss suffered by Adobe last year (150m accounts), the attack on Home Depot could pose considerably greater danger of theft and fraud as it includes financial details and not just user accounts. </p>
<p>Once again, the extent to which people rely on terrible, easy-to-guess passwords is <a href="http://www.zdnet.com/just-how-bad-are-the-top-100-passwords-from-the-adobe-hack-hint-think-really-really-bad-7000022782/">made very clear</a> by the data stolen from Adobe and released to the web: the top five passwords of Adobe users were “123456”, “123456789”, “12345678”, “password” and “adobe123”. These are no more secure than no password at all – truly, for cybercriminals it is like shooting fish in a barrel.</p>
<p>So while defences have toughened up on the back-end, the risk now is at the front-end, which is exposed to a range of different web browsers, devices and environments. If each credit card is worth up to US$100, then there is ample incentive to find new and inventive ways of shooting these fish. For example, the malware used to attack Home Depot was <a href="http://techcrunch.com/2014/09/18/home-depot-hack/">completely new and unseen</a>, showing that malware morphs and transforms to overcome defences against it. With the potential illicit profit to be made, the incentive is there for hackers to place considerable investment into creating a successful attack.</p>
<p>In barely 20 years we have created a complex and substantial e-commerce infrastructure from nothing. But we are failing to secure ourselves from large-scale fraud that will damage citizens, companies and economies. We need to invest in and design better ways of detecting, protecting and analysing our electronic infrastructure and demand better implementations of them from those we do business with.</p><img src="https://counter.theconversation.com/content/32122/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bill Buchanan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Imagine if UK banks decided to send out new credit cards to all their customers, but they were all “lost in the post” and the details ended up for sale on some dubious website. The recently discovered…Bill Buchanan, Head, Centre for Distributed Computing, Networks and Security, Edinburgh Napier UniversityLicensed as Creative Commons – attribution, no derivatives.